The price of ether (ETH), the native cryptocurrency of the Ethereum network, has fallen 44% against bitcoin (BTC) since the Merge upgrade was implemented.
As CriptoNoticias reported, with its activation the network created by Vitalik Buterin abandoned mining with Proof of Work (proof of work) by the Proof of Stake (proof of stake or PoS). Since then, A group of validators is responsible for confirming transactions that are added in each new block in the chain.
Almost two years after that event, the data explorer on-chainCryptoQuant, indicates in his weekly report How has the Ethereum network performed compared to Bitcoin?. First of all, it is noteworthy that the price ratio of ETH measured in BTC went from 0.07909 BTC to 0.0425 BTC, its lowest level since 2021.
Along these lines, the report mentions the launch of exchange-traded funds (ETFs) in the United States based on ether did not act as a catalyst for the asset priceIn fact, the price fell by 18% from July 23 to September 9.
Since its launch, financial instruments based on ETH only had 9 positive days and They accumulate money outflows of more than 568 million dollars.
According to CryptoQuant projections, the price of the digital asset of the Ethereum network could fall further against BTC as it is still above the undervaluation line“We estimate that ETH would need to fall to around 0.02 in BTC terms – a 50% drop – for it to enter undervalued territory,” the report notes.
To reach this conclusion, the MVRV is used, a technical analysis indicator that refers to market value to realized value (market value to realized value), which allows to evaluate whether the The price of an asset is high or low compared to the last movements made by investors.
As seen in the chart below, the MVRV (blue line) for the ETH/BTC pair is at 0.6 and remains outside the green zone, so it is considered not yet in undervalued territory against the digital currency created by Satoshi Nakamoto.
That is why there is still room for ETH to continue losing its value relative to BTC. In other words, according to the MVRV, it is not yet seen as a buying opportunity for investors.
In the chart, it is also observed that the last time ETH was considered undervalued against BTC the MVRV was less than 0.4.
The reasons behind this fall
According to CryptoQuant, the drop in the price of ETH It is related to the poor performance of the Ethereum network after the Merge.
“While Bitcoin network activity continues to grow thanks to new features and improvements, Ethereum network activity is declining, which could negatively impact its relative value and attractiveness compared to Bitcoin.”
CryptoQuant, on-chain analytics company.
With the new functionalities that Bitcoin has promoted, he refers to the emergence of RUNES and Ordinals token standards, which They facilitate the registration of data such as texts, images or even video games in the ecosystem. Furthermore, it is worth noting that the mentioned protocols optimized the recording of information on the network.
Along these lines, the report emphasizes that the price decline can be attributed to “lower transaction fees on Ethereum after the Dencun upgrade.”
This update introduced temporary data storage on Ethereum’s second layer or L2, where transaction fees are cheaper.
However, what happens is that If demand moves to layer 2, the buying pressure on ETH is reduced as fewer users need that asset to pay gas fees.
According to data from Token Terminallayer 1 network revenue fell by 99% since March 2024:
Lastly, CryptoQuant notes that “the ‘Dencun’ upgrade has had an inflationary effect on the supply of ETH. After this upgrade, ETH has become inflationary again, meaning that the total amount of ETH in circulation is increasing again.”